BRK-Tilson

Aren't We Concerned

Aren't We Concerned About the Uncertainty of Berkshire After Buffett? Answer: Not really, for two primary reasons: 1. Buffett isn't going anywhere anytime soon. We think it's at least 80% likely that Buffett will be running Berkshire for five more years, and perhaps 50% likely he'll be doing so for 10 more years • Buffett turned 83 on Aug. 30 th , is in excellent health, and loves his job • There are no signs that he is slowing down mentally – in fact, he appears to be getting better with age • A life expectancy calculator (http://calculator.livingto100.com) shows that Buffett is likely to live to age 93 (10 more years) – and we'd bet on the over 2. The stock is undervalued based on our estimate of intrinsic value, which does not include any Buffett premium • We simply take investments/share and add the value of the operating businesses, based on a conservative multiple of their normalized earnings • The value of the cash and bonds won't change, and Coke, American Express, Burlington Northern, GEICO, etc. will continue to generate robust earnings even after Buffett is no longer running Berkshire -24-

Why Doesn't Buffett Identify His Successor Now? We agree with Buffett's decision not to name his successor for three reasons: 1. It would place enormous pressure and expectations on this person, which is unnecessary and counterproductive; 2. It might be demotivating for the candidates who were not chosen; and 3. Who knows what will happen between now and the time that a successor takes over (which could be more than a decade)? – Maybe the current designee falls ill, leaves Berkshire, performs poorly, or makes a terrible mistake (as Sokol did)? – Or what if another candidate (perhaps one of the two backup successors today) performs incredibly well, or Berkshire acquires a business with a fantastic CEO, and Buffett and the board decide that another candidate is better? – In either case, Buffett and the board will be able to switch their choice without the second-guessing and media circus that would occur if the successor had been named -25-